Method and System for Creating and Trading Derivative Investment Instruments Based on an Index of Financial Exchanges

Abstract

A method and system for creating a stock index for a predetermined group of securities and futures exchanges is disclosed. The method may include obtaining first trade information for each security representative of the predetermined group of securities and futures exchanges during a first time period, aggregating the first trade information for a predetermined time period, storing the aggregated first trade information, calculating from the aggregated first trade information an index for the predetermined group of securities and futures exchanges, determining a standardized measure of the index utilizing the aggregated first trade information obtained in the first time period, and periodically recalculating the index based on second trade information for each security representative of the predetermined group of securities and futures exchanges during a second time period.

1 . A method for creating a stock index for a predetermined group of securities and futures exchanges, the method comprising: 
 obtaining first trade information for each security representative of the predetermined group of securities and futures exchanges during a first time period;    aggregating the first trade information for a predetermined time period;    storing the aggregated first trade information;    calculating from the aggregated first trade information an index for the predetermined group of securities and futures exchanges;    determining a standardized measure of the index utilizing the aggregated first trade information obtained in a first time period;    periodically recalculating the index based on second trade information for each security representative of the predetermined group of securities and futures exchanges during a second time period; and    transmitting the recalculated index to a communications network.    
   
   
       2 . The method according to  claim 1 , wherein the predetermined group of securities and futures exchanges comprise U.S.-listed futures and securities exchanges.  
   
   
       3 . The method according to  claim 2 , wherein the predetermined group of securities and futures exchanges comprises CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings, Inc. (CME), IntercontinentalExchange (ICE), International Securities Exchange, Inc. (ISE), and Nasdaq Stock Market Inc. (NDAQ).  
   
   
       4 . The method according to  claim 1 , wherein the first trade information includes stock price information.  
   
   
       5 . The method of  claim 1 , further comprising generating a derivative contract based on the recalculated index, wherein the recalculated index estimates sector performance of publicly traded financial exchanges.  
   
   
       6 . The method of  claim 5 , wherein the derivative contract is an options contract.  
   
   
       7 . The method of  claim 5 , wherein the derivative contract is a futures contract.  
   
   
       8 . A method for creating a stock index for a predetermined group of securities and futures exchanges, the method comprising: 
 collecting stock price data of the predetermined group of securities and futures exchanges on a re-balancing date;    associating a fixed monetary unit value to a stock portfolio comprising the predetermined group of securities and futures exchanges;    dividing the fixed monetary unit value by a number of constituents in the predetermined group of securities and futures exchanges to obtain a constituent weighting value; and    dividing the stock price data by the constituent weighting value to obtain a constituent rebalancing value.    
   
   
       9 . The method according to  claim 8 , wherein the constituent rebalancing value is an approximate value at which each constituent in the predetermined group of securities and futures exchanges is weighted  
   
   
       10 . The method according to  claim 8 , further comprising: 
 dividing the price by the constituent weighting value; and    rounding to the nearest share to obtain a number of shares assigned to the constituent at the re-balancing date.    
   
   
       11 . The method according to  claim 10 , further comprising adjusting shares of the predetermined group of securities and futures exchanges to maintain that constituent's weight.  
   
   
       12 . The method according to  claim 11 , wherein a divisor maintains the continuity of the index.  
   
   
       13 . The method according to  claim 8 , wherein the predetermined group of securities and futures exchanges comprises CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings, Inc. (CME), IntercontinentalExchange (ICE), International Securities Exchange, Inc. (ISE), and Nasdaq Stock Market Inc. (NDAQ).  
   
   
       14 . A computer-readable memory containing processor executable program instructions for creating a stock index for a predetermined group of securities and futures exchanges according to the following steps: 
 obtaining first trade information for each security representative of the predetermined group of securities and futures exchanges during a first time period;    aggregating the first trade information for a predetermined time period;    storing the aggregated first trade information;    calculating from the aggregated first trade information an index for the predetermined group of securities and futures exchanges;    determining a standardized measure of the index utilizing the aggregated first trade information obtained in the first time period; and    periodically recalculating the index based on second trade information for each security representative of the predetermined group of securities and futures exchanges during a second time period.    
   
   
       15 . The computer readable medium of  claim 14 , wherein the predetermined group of securities and futures exchanges comprise U.S.-listed futures and securities exchanges.  
   
   
       16 . The computer readable medium of  claim 15 , wherein the predetermined group of securities and futures exchanges comprises CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings, Inc. (CME), IntercontinentalExchange (ICE), International Securities Exchange, Inc. (ISE), and Nasdaq Stock Market Inc. (NDAQ).  
   
   
       17 . The computer readable medium of  claim 14 , wherein the first trade information includes stock price information.  
   
   
       18 . The computer readable medium of  claim 14 , further comprising processor executable program instructions for generating a derivative contract based on the recalculated index, wherein the recalculated index estimates sector performance of publicly traded financial exchanges.  
   
   
       19 . A system for creating and trading a derivative instrument based on a stock index for a predetermined group of securities and futures exchanges, the system comprising: 
 a financial exchange index module, the financial exchange index module having a processor coupled to a memory, wherein the memory comprises processor executable instructions for: 
 obtaining first trade information for each security representative of the predetermined group of securities and futures exchanges during a first time period;  
 aggregating the first trade information for a predetermined time period;  
 storing the aggregated first trade information;  
 calculating from the aggregated first trade information an index for the predetermined group of securities and futures exchanges;  
 determining a standardized measure of the index utilizing the aggregated first trade information obtained in a first time period; and  
 periodically recalculating the index based on second trade information for each security representative of the predetermined group of securities and futures exchanges during a second time period; and  
   a dissemination module in communication with the financial exchange index module, the dissemination module configured to transmit the index or the recalculated index to market participants over a communication network.    
   
   
       20 . The system of  claim 19 , further comprising a trading module in communication with the communication network, the trading module configured to receive buy or sell orders for derivatives based on the index and to transmit results of the buy or sell orders to market participants over the communication network.